Abstract
The paper examines the performance of Shariah compliant and conventional portfolios in Pakistan during the period 2009-19 by
using Markowitz minimum-variance framework. Using daily excess returns, we first investigate the impact of Shariah screening
criteria on stock returns then we evaluate the overall risk of Shariah compliant and conventional portfolios. The results reveal
negative impact of Shariah screening criteria on stock returns’ cross-section. Further, unconstrained portfolio investment strategy
outperforms faith-based investing. Finally, the findings of the study suggest that induction guidelines employed in PSX for
companies to be listed in Shariah compliant index needs to be reviewed to practically attain the objectives of Islamic moral economy
such as avoiding Gharar (uncertainty) and Maysir (speculation).
Saqib Farid, Rubeena Tashfeen, Adeeba Rashid, Muhammad Abubakr Naeem. (2019) Does Shariah Based Asset Categorization Improve Portfolio Performance, Paradigms , Vol 13, Special Issue.
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